Limited Liability Partnership concept was introduced in India by way of Limited Liability Partnership Act, 2008. It is a preferred mode of doing business in several Countries. A Limited Liability Partnership is a corporate business vehicle that provides both the benefits of a company and flexibility of a partnership firm i.e. limited liability and allows its partners the flexibility of organising their internal structure as a partnership based on a mutual agreement. This structure is available to small business start ups and service industries.
A corporate entity status enables LLP to be taken more seriously than a proprietorship/partnership status does. LLPs also have many advantages over proprietorships, partnerships and limited companies, as elaborated below:
- A LLP is very easy to form with less formality. It can be formed with least possible capital. There is no minimum capital requirement.
- A LLP is a legal entity, a juristic person established under the Act.It has its existence separate from its partners.
- A LLP requires a minimum 2 partners while there is no limit on the maximum number of partners.
- The liability of partners is limited to the contribution to the LLP, as it has separate legal entity from its partners. Their personal assets are free from the liabilities of LLP. Liability for repayment of debts and lawsuits incurred by the LLP lies on it and not on the partners.
- In LLP, Partners unlike partnership are not agents of the partners and therefore they are not liable for the individual act of other partners in LLP, which protects the interest of individual partners.
- In case of LLP, there is no such mandatory requirement to get their accounts audited. This is perceived to be a significant compliance benefit. Audit is not required unless capital exceeding Rs. 25 lakh or turnover exceeding Rs. 40 lakh.
- In a LLP, there are less regulatory formalities and compliances. A LLP is required to file only two, namely, the Annual Return & Statement of Accounts and Solvency.
- For income tax purpose, LLP is treated on a par with partnership firms. Thus, LLP is liable for payment of income tax and share of its partners in LLP is not liable to tax. Thus no dividend distribution tax is payable.
- Provision of ‘deemed dividend’ under income tax law, is not applicable to LLP. Section 40(b): Interest to partners, any payment of salary, bonus, commission or remuneration allowed as deduction.
- However, no such tax is payable in the case of LLP and profits of a LLP can be easily withdrawn by the partners.
- In case of the death of the partner, a LLP will continue with other partners. The legal heirs of LLP will get the profit/contribution of the deceased partner. They are not entitled to become a partner of the LLP unless a LLP agreement can provide the same.
- It is easy to become a Partner or leave the LLP or otherwise it is easier to transfer the ownership in accordance with the terms of the LLP Agreement and a partner can transfer his share of profit/loss in an LLP wholly or part subject to the LLP agreement.
- If a LLP becomes insolvent and is wound up, only the assets of the LLP are used to clear its debts.The partners of LLP have no personal liabilities and are not made bankrupt and are free to operate as credible businessmen.
- A LLP has an easy procedure to dissolve or wind-up.
- There is less Government Intervention in a Limited Liability Partnership. Limited Liability Partnership Act, 2008 gives LLP the at most freedom to manage its own affairs. Partners can decide the way they want to run and manage the LLP, in form of LLP Agreement.
- Body corporate can be a partner of a LLP.
- As a juristic legal person, a LLP can sue in its name and be sued by others. The partners are not liable to be sued for dues against the
The Indian Lawyer
CREATIVE INDIA: INNOVATIVE INDIA
All Intellectual Property Rights (IPR) in India were governed by the TRIPS. Now for the first time Government of India has adopted a pro-active approach towards drawing a roadmap for IPR in the country and has come out with a Policy to improve investment climate in the country as well as promote innovation and improve national competitiveness; India has even declared this decade as the ‘Decade of Innovation.”
The Policy seeks to balance the goals of economic growth and social justice, and makes important recommendations towards the same. However, there are some areas where the Policy could have made more comprehensive recommendations. In particular, it would be important to ensure that India’s rich repository of traditional knowledge – particularly in areas like medicine – is offered the same level of intellectual property protection as other products and processes. In order to make the Policy a success it is important for state governments to play the role of constructive partners in creating and maintaining a robust, equitable and predictable IPR regime. They can do this by establishing State level Innovation Councils and strengthen them through financial and other support.
The Policy lays down the following seven objectives:
- IPR Awareness: Outreach and Promotion – To create public awareness about the economic, social and cultural benefits of IPRs among all sections of society.
- Generation of IPRs – To stimulate the generation of IPRs.
- Legal and Legislative Framework – To have strong and effective IPR laws, which balance the interests of rights owners with larger public interest.
- Administration and Management – To modernise and strengthen service-oriented IPR administration.
- Commercialisation of IPRs – Get value for IPRs through commercialisation.
- Enforcement and Adjudication – To strengthen the enforcement and adjudicatory mechanisms for combating IPR infringements.
- Human Capital Development – To strengthen and expand human resources, institutions and capacities for teaching, training, research and skill building in IPRs.
Each program or activity under the objectives will be bench marked with the best parameters applicable to the Indian situation. Monitoring the progress of implementation of the National IP Policy, linked with performance indicators, targeted results and deliverables will be done.
As per Article 39 of the Constitution of India, “the State shall in particular, direct its Policy towards securing that the ownership and control of the material resources of the community are so distributed as best to serve the common good.” The National IPR Policy is contoured in a manner that it encourages greater use of exceptions and limitations to the otherwise exclusionary use of intellectual property, encourages the expansion of the public domain, secures proportionality in enforcement of IP rights, and promotes alternatives to IP.
Mayank Singh Raghuvanshi
The Indian Lawyer
Though this is one of the most crucial aspects of a business or while purchasing an asset, this is completely ignored by one and all, in their poor understanding of the importance of well drafted documents. Most people do not grasp the consequence of poorly drafted documents which are very often a cut and paste job. It is only when disputes arise that people realise the mistake of not having considered the importance of a well drafted document.
Has anybody been able to understand why a person putting his entire life’s earnings in buying the much coveted flat or office fails to engage a good lawyer for drafting such a document. It is a general reaction that by taking a draft that is already available, that is, with the property dealer or available on the internet they can get a foolproof document. Mostly, such documents are driven by the fact that the person using it is saving pennies. Alas a fallacy as the so called foolproof document makes a fool of the person who has availed of it and it is a classic case of penny wise pound foolish. A well drafted document can save the client several legal headaches that are bound to arise when the drafted document is not customised or does not have essential information or fails to provide an indemnity in case things go wrong.
Even in the commercial world we have seen corporates making the mistake of using an earlier drafted document by merely changing the names and other details without realising the consequence of poorly drafted documents. When things go wrong the corporate can actually end up paying several hundred times the cost of a good document. In today’s fast moving commercial world rights and liabilities of parties must be set out in the written form and that too drafted by a lawyer well versed in commercial laws. Such timely action can prevent problems that would have routinely surfaced had the document been a poor draft.
Lastly and finally the most important aspect would be that when a party moves the Court or Arbitrators for enforcement of his/its legal rights, not much can be done by way of relief if the basic document that determines different aspects of the relation between the parties to the Contract are silent or missing. At the final stage no amount of oral arguments talking about the real intention of the parties can help the aggrieved party from getting relief.
Sushila Ram Varma
Chief Legal Consultant
The Indian Lawyer
Under the Indian Laws, all agreements are contracts provided it is made by the free consent of parties competent to contract for a lawful consideration and with a lawful object. Any agreement entered into by a party without free consent would be void.
In order to constitute a valid contract both parties to a contract must willingly consent to the terms and conditions of the contract in order to make the contract valid and legally binding.
Consent has been defined under the Indian Contract Act as two or more persons are said to consent when they agree upon the same thing in the same sense.
Consent is said to be free when it is not caused by-
- Undue influence
Any agreement that does not have free consent as defined aforesaid will be invalid and unenforceable.
Coercion would mean the committing or threatening to commit any illegal act or the unlawful detaining or threatening or threatening to detain any property to the prejudice of the person who is entering into the agreement.
Undue influence would be whether relations between the parties as such that one of the parties is in a position to dominate or prevail over the other and uses that position to take unfair advantage of the other.
Fraud means and includes a suggestion by one party to the other of the fact which the first party knows is not true or the active concealment of a fact by one person in order to use it for his advantage. It can also be a promise that has been made without the intention of performing it or with the intention to deceive the other party.
Misrepresentation means that a positive assertion of a material fact in a manner by the person making it though he knows is not true in order to take advantage. It could also mean causing the other party to make a mistake as to the substance of the subject of the agreement.
A party to a contract whose consent was caused by misrepresentation, may if he thinks fit, insist that the contract shall be performed and that he shall be placed in a position which he would have been placed had the representations be true.
Sushila Ram Varma
Chief Legal Consultant
The Indian Lawyer
It is widely believed that legal education is necessary only for one who wants to pursue law as a profession. But that is not true. Basic legal education is very important for all in their daily lives. Basic knowledge of law will help one to understand and tackle several problems, from consumer protection to fundamental rights. Knowledge of law informs you of your rights and your responsibilities towards society.
Information about the law enables one to reason out in an adverse situation. For an instance, a person who is caught by a police constable without cause and is threatened arrest will plead with the policeman not to arrest him as he has done nothing wrong. But if he has a little legal knowledge that he cannot be arrested without any warrant, he would behave differently instead of pleading.
Below are some basic laws that everyone must be aware of:
- While buying an immovable property (flat or land)-
A legal search of the property must be done. This is important because supposedly, if one bought a house without public notice or inspection, and it turned out that the owner did not have a clear title, it will obviously create legal problems.
- Cheque Bouncing-
Cheque bouncing has now become a serious offence. The moment a cheque bounces with the endorsement “insufficient Funds”, one should go to a lawyer and send the person a legal notice demanding his money. This has to be done within 30 days of the cheque having bounced. On receiving the notice the cheque issuer is required by law to pay the money within 15 days.
- Registration of documents-
Registration of all legal agreements related to immovable property worth more than Rs. 100/- is compulsory. These include Lease Agreements, Sale Deeds, Gift Deeds, etc.
- Police complaints-
While making police complaints, one should always take help from a lawyer. This is necessary because if the complaint ends up in court, the police complaint serves as an important piece of evidence.
There is a limitation period for filing every civil and criminal case which one has to be aware of. Failure to adhere to the limitation period can result in a person’s losing his legal right to sue permanently.
The Indian Lawyer